Royal & SunAlliance, the UK insurance group, can look forward to a successful rights issue only if it convinces investors that it will use the proceeds to replenish capital and finance future growth, rather than to strengthen its claims reserves, according to a Merrill Lynch analyst report.

Analysts expect RSA to launch a £750m (€1.2bn) to £1bn rights issue, offering deeply discounted shares one-for-one for around 50p. RSA has said it will make a decision on capital raising before its third-quarter results on November 7.